Thursday, November 5, 2009



Donatella Versace, in black, acknowledges applause at the end of the Versace Spring 2010 collection in Milan last month.


November 5, 2009
Restructuring Luxury at Versace
By GUY TREBAY

“I AM a survivor,” the designer Donatella Versace said matter-of-factly during a recent blitz of New York, a visit that made it appear little had changed in the world of the occupationally fabulous.

Whether presiding over a benefit gala at the Whitney Museum of American Art, where she is a benefactor, or being photographed for the tabloids with a haggard Lindsay Lohan or being honored at a celebrity lunch given for her by Tina Brown, Ms. Versace maintained her signature aura of high-maintenance glamour.

But her composure, like her company’s Medusa logo, was a mask. Two days after Ms. Versace left New York to attend the Fashion Rocks concert in Brazil, Gianni Versace S.p.A., the family-held company over which she presides, announced that it would cut 26 percent of its worldwide work force, as many as 350 jobs. It projected a loss of $45 million in 2009 and no return to profitability before 2011.

It was not the first sign that Versace is suffering from the sharp rejection of luxury goods by consumers around the globe. In early October, the company announced the closing of its three Japanese stores, an abrupt departure from a once-lucrative market entered in 1981, during the glory days of the label.

“In business you cannot just dream about the economy returning, something nobody in the world is saying for sure will happen,” Gian Giacomo Ferraris, Versace’s new chief executive, said by telephone from Milan. “A responsible person has to face reality and act according to reality,” he added. “But Versace also, as a fashion company, needs to go back to being a trendsetter in creative terms.”

That assertion seemed to raise as many questions as it aimed to deflect: How does one set trends in a trade whose giddy existence is under siege? Is there a future for relatively small, privately owned luxury fashion houses like Versace in an industry dominated by multinationals like LVMH Moët Hennessy Louis Vuitton, whose bottom line is underpinned by a portfolio including Cognac and Champagne?

Although reports this week suggest that American consumers may slowly be reacquiring a taste for luxury, the worldwide market in such goods has declined 10 percent since 2007, to a projected $221 billion, according to the business consultants Bain & Company.

The recession has made serious inroads on independents like Versace, which has faced the added challenge of reclaiming territory ceded to designers who poached on its market. In many ways, Dolce & Gabbana, Roberto Cavalli and others built their brands by adapting Versace’s formula of frank eroticism, red-carpet stunts (Jennifer Lopez’s notorious “Jungle” dress with its navel-baring décolletage was a Versace design) and a strategy of enlisting celebrities to act as glamorous sandwich boards.

Yet, as Ron Frasch, president and chief marketing officer at Saks Fifth Avenue, noted, there are “very few brands in the world that have that kind of name recognition and customer loyalty.” When Mr. Frasch ran Bergdorf Goodman, he reintroduced Versace to that specialty retailer and he again made sure that a Versace boutique was prominently placed on Saks Fifth Avenue’s newly renovated fashion floor.

How successfully Versace will ride out the current crisis is a matter not only of how well its restructuring works but also of how balanced its offerings are “from a price point of view,” Mr. Frasch said. Like its competitors, Versace will have to pull off the hat trick of retaining its luxury aura while attracting new consumers with more affordable goods. “Versace always serviced a much broader range of consumers than people would believe,” Mr. Frasch said. “And it remains a very valid brand.”

That this is so is owed substantially to the efforts of a designer perhaps better known for her vices and cosmetic surgeries than for the creative influence she exerts on a label her brother began in the mid-1970s. When a spree killer murdered the house’s founding designer, Gianni Versace, on the steps of his Miami mansion 12 years ago, Ms. Versace was vaulted into a position she insists she never desired. Working alongside her brother for years as a sounding board and muse, Ms. Versace was “always happier in the background,” she said.

Seated on a sofa in her suite at the Waldorf Towers, where she was registered for privacy’s sake as “Mrs. Montez,” Ms. Versace was dressed in form-hugging black trousers and the stilettos she removes only at the gym. With her hair bleached to a color one associates with mythological nymphets, and with her heavily accented English, she seemed every bit the exotic satirized by Maya Rudolph on “Saturday Night Live” — a characterization that, Ms. Versace said, “I laughed about — once.”

About her brother’s death and her own transition to designer and the face of a label, Ms. Versace said: “It was not easy to believe in myself or the future. Everyone was looking at me like a savior, and I had to have this image of this powerful strong woman, which I am not.”

That assertion does not jibe altogether with the steeliness that led to the departure of Giancarlo Di Risio, the chief executive who was credited with cleaning house for Versace, in June. Mr. Di Risio had returned the company to profitability after years of corporate vagrancy that resulted, at least partly, from Ms. Versace’s well-publicized problems with drugs.

The two were reported to have clashed about cost cutting, and yet barely four months after installing a new chief executive, Mr. Ferraris, this year, Ms. Versace approved his decision to close stores, consolidate manufacturing, outsource operations and eliminate hundreds of jobs.

“In my life I had no other choice than to become a strong person,” Ms. Versace said. “I had to do it, at first for Gianni, and also for my children,” she said, referring to her daughter, Allegra, who inherited 50 percent of the company in 2004 when she turned 18.

“We were not selling like crazy at the beginning,” Ms. Versace said of those early days and early collections. They were not necessarily selling like crazy when she entered rehab in 2004. In truth there have always been skeptics who doubted a label directed by the sister of a designer whose greatest fame dates from an era long enough gone for fashion to have recycled it several times. There were those who questioned whether Versace could hold its own in a fashion sphere that already by the late 1990s had come to be dominated by deep-pocketed multinationals.

Yet Ms. Versace has not only sustained the label creatively but helped lead it toward profitability. And, despite a reputation for lavish living, it was she, together with her older brother, Santo, who oversaw the divestment of Gianni Versace’s signature extravagances — the mansions in South Beach and on East 64th Street in Manhattan, the Lake Como villa, the collections of Roman sculpture and neo-Classical and 20th-century art.

She points out that, even in the days when she was such a compulsive cocaine consumer that fashion insiders alert to this open secret speculated on whether she would ever leave the bathroom to make an appearance at one of her own dinner parties, she still produced eight collections a year.

“If my problem was as big as everyone says, how did I run this company and create all these collections?” said Ms. Versace, whose 2004 stint at a rehabilitation center in Arizona came about only after a group of friends, Elton John among them, staged an intervention during one of these parties at her palazzo on via Gesù in Milan.

“I was dressed up, very glamorous, and I went to the bathroom to do a line,” Ms. Versace said. “I didn’t think anything was strange at the time, but then when I came out, all my friends were sitting in a circle on chairs and they said: ‘You have a problem. We love you. You have to get help.’ ”

That episode, like the recession, Ms. Versace shrugs off as an old story. She may never be judged as anything other than “this woman whose brother died or this woman who takes drugs.” And cash registers may never again ring to the same merry ka-ching tune as in the days when consumers indiscriminately snapped up label bags and shoes. “But you have to face the truth,” Ms. Versace said, whether seeking sobriety or reinvention in the global marketplace. “For me, life is about chapters,” she said, drawing one of the Marlboro Reds she chain-smokes from a packet customized with her DV monogram.

“Die and born again, die and born again,” she said, striking a match. “It’s the story of my life.”

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